No Coercive Action on MAT Cases - CBDT
THE CBDT in a Press Release states,
Finance Minister has, while responding to the discussions on the Finance Bill in Rajya Sabha on 7th May, 2015 announced constitution of a Committee headed by Justice A.P. Shah to look into, inter alia, the issue of MAT on FIIs. The Committee is expected to give its report on this issue expeditiously.
In the light of FM's announcement, officers dealing with International Taxes have been advised that no coercive action be taken for recovery of demand already raised by invoking provisions of MAT in the cases for foreign companies. Issues of fresh notices for reopening of cases as also completion of assessment should also be put on hold unless the case is getting barred by limitation .
In his budget speech, the Finance Minister said, In order to rationalise the MAT provisions for FIIs, profits corresponding to their income from capital gains on transactions in securities which are liable to tax at a lower rate, shall not be subject to MAT. But the amendment to the Act is to come into effect from 1st April 2016. This gave the much needed strength to the Department to issue Show Cause Notices to FIIs for the period prior to AY 2016-17. The theory that was circulated was that prospective exemption made it clear that there was tax liability for the past period. And what followed was perhaps one of the most watched fiscal dramas. The FIIs cried foul, the stock markets crashed, analysts took sides and loudly proclaimed their views. Even the FM announced that India is not a tax haven and whatever taxes are due have to be paid. Then they clarified that MAT provisions are not applicable to FIIs covered under the DTAA. Last week the Finance Minister announced in the Parliament that he was referring the matter to Justice AP Shah and now the CBDT puts on hold notices and recovery.
All fine, but are we not going in the wrong direction? When they announced the exemption in the Budget 2015, didn't the babus know that the question of taxability for the previous years would be an issue? Couldn't they clarify then itself that the exemption is only prospective and tax has to be paid for the past years? And what is the logic in exempting a tax from tomorrow, but taxing it yesterday, especially when yesterday you were not aware that it was taxable? Till this exemption was given, even the Government was not clear whether this tax was leviable. On the whole, they gave a lot of bad publicity to the Finance Minister and the Modi Government, as businessmen went around talking about India's tax terrorism. Taxing or not is your decision, but please be sure about it - don't confuse the foreigners as you have been confusing Indians all these years and making a fine art of litigation.
Poor Finance Ministers have to take the blame for the follies of babudom.